There is a good reason to buy now instead of waiting for prices to come down.
Consider a typical home that sells for around $219,000. For example, you put down 20% and get a 30 year fixed rate mortgage at today’s rate of 5.5%. With that, monthly principal and interest payments would come to around $995.

So let’s say that 12 months from now the same home sells for 10% less or around $197,000. But by then the recession is over and the Fed starts jacking up interest rates to slow any inflation. Mortgage costs rising just one-half percent, to say 6% or a little more, your monthly payments will actually be similar or even a higher. The same home monthly payments might cost closer to $1,000 per month. In this case, you would not have saved anything.

And to make it more difficult, homes prices would have steadied and sellers will be less willing to negotiate, making any bargains harder to come by. In the mean time, you would have lived in a place you are not happy with.

Housing risks always seem more severe when headlines give indications otherwise, but this is actually the best time to think investing in a home long term.

The Federal Reserve’s recent rate cutting moves are not lowering mortgage rates for new buyers, as much as they helping those who hold existing adjustable rate mortgages.

In addition, rates on home equity lines, credit cards, and many auto loans have all dropped significantly. Many homeowners now will not face higher rates as their adjustable-rate mortgages reset, helping alleviate some of the recent foreclosure problems.

New applicants for mortgages are likely to continue to pay more then would be expected. Mortgage rates usually follow the 10 year US Treasury rates, and have traditionally traded just below 2 percent above 10-year treasury yields. Treasury’s currently yield about 3.45 percent. However, investors including pension funds, insurance companies, and bond mutual funds are demanding a greater premium these days for mortgages over the usually less risky U.S. Treasury bonds.

Good advice for buyers seeking mortgages is to shop around. All mortgages are not alike, and mortgage rates are still at historically low rates.

Now is the best time for those buyers who have been sitting on the fence to make their move into homeownership or for those who want to buy up into larger homes.

Preparing your home for sale will make a big difference in the amount of time it takes to sell. By following a few simple pre-marketing tips, you can eliminate any buyer objections before they arise by doing needed repairs, maintenance and improvements.

Outdoors:
Spruce up gardens and lawn, trim shrubs and replace dead plants; Arrange neatly and clean outdoor furniture; Paint your front door for good first impressions; Manicure your yard and ensure drive way and entryways are free of cutter.

Exterior:
Ensure mailboxes, house numbers, and exterior lighting is in good working condition; touch up paint where needed around the home; inspect chimneys for damage and cracks; repair any loose trim, drain pipes and fencing; and clean window and screen stains. Garage: Remove clutter and straighten up shelves; clean and scrub floors.

Living areas:
Apply new paint if needed with neutral toned paint; clean carpets and drapes; replace burnt out light bulbs; clean fireplaces and any smoke stains.

Kitchen:
Clean and de-clutter sinks, appliances and counter tops; Wash and wax floors; clean oven, refrigerators and other appliances; clean any tile and grout that is stained or dirty and replace tiles if needed.

Bathrooms:
Clean mirrors, chrome, glass and any other surfaces; put in a new shower curtain; repair leaky or dripping faucets; clean caulking and grout if needed.

Closets:
Ensure doors, closets and drawers open easily; remove clutter and straighten up shelves and racks; arranged clothes and shoes.

Overall tips:
Check out the basics around the house. It only takes a few minutes to ensure all windows, doors and cabinets aren’t loose, don’t stick or squeak; Clean furnaces, A/C coils, and hot water heaters to show your home is well maintained.

Despite national headlines pounding out news of a housing market meltdown, all markets are not even remotely equal. In the NAR’s latest price survey, almost half of the country experienced price increases. Upstate New York for example is an area where home prices in the final quarter of 2007 raised an average of 9%, Binghamton, Alabama 15%. The Texas market has been strong with price gains averaging 7%. Some place showed decreases. Price declines are occurring and are quite notably in some coastal states and in markets with a high prevalence of sub-prime loans. Prices fell 13% in Cape Coral, 14% in Detroit, and 19% in Sacramento.

Variations in each Market

The data clearly shows significant variations across markets. As real estate practitioners know very well, there are further measurable differences across neighborhoods within similar markets. No doubt there are some people under great financial stress. Sub-prime products that should never have entered the marketplace have wreaked havoc on many communities around the country. Homeowners unable to meet payments are losing their homes and falling home values have cut the equity of those homeowners who make their mortgage payments on time. Investors taking a walk may not feel the same financial squeeze but they are getting hit on credit scores; many investors using low documentation loans bought multiple properties and are now simply walking away from those properties in declining markets.

Skirting Recession

Concerning the economy, it will be close, but we will skirt recession. Job gains of around one million can be expected for all of 2008. Affordability will improve as well; NAR’s housing affordability index is expected to rise from 113 in 2007 to 129 in 2008. Job gains and rising affordability conditions are the right combination to induce buyers into the marketplace. But affordability could change in markets as more buyers start entering the market and price start a slow rise again. The current market cycle is unique because of significant local market variations. It is also unique because of buyer psychology factors, in spite of pent-up demand and improving affordability conditions. Home sales in the second half of 2008 will be notably higher than in the first half of the year.

To quote Warren Buffet’s investment philosophy: when everyone is greedy, be scared; and when everyone is scared, be brave. If people have the financial capacity and are looking for a home for the long haul, the fear factor should be put aside. Current situations in many local markets present a golden opportunity in attaining the American Dream with historically low interest rates.

Buyers, if you have been sitting on the sidelines watching, now is a good time to buy!  Home prices have come down, interest rates are excellent, and banks are providing excellent loan packages. 

Housing industry observers are hopeful that the recent decline in mortgage rates will lead to a recovery in the market.

Freddie Mac reports that interest on 30-year, fixed loans fell for the fourth straight week, landing at their lowest level in nearly four years.

Economists say mortgage rates averaged 5.48 percent for the week ended Jan. 24 — down from 5.69 percent a week ago — because of the latest reports about the economy and because the Federal Reserve made its biggest cut in 20 years to a key interest rate.

Freddie Mac also reports that rates on 15-year mortgages declined to 4.95 percent from 5.21 percent, rates on five-year adjustable-rate mortgages dropped to 5.13 percent from 5.4 percent, and rates on one-year ARMs slipped to 4.99 percent from 5.26 percent.